XAU/USD Current price: $1,931.16
- Hotter-than-anticipated Canadian inflation triggered risk aversion early US session.
- The Federal Reserve will present fresh economic projections alongside the monetary policy decision.
- XAU/USD retreats from a fresh two-week high holds neutral ahead of the Fed’s decision.
Gold prices made little progress on Tuesday, with XAU/USD trading in the $1,930 price zone. The US Dollar remained away from the market’s favor for most of the day, although losses were moderated amid prevalent caution.
The USD found demand ahead of Wall Street’s opening and following the release of the Canadian Consumer Price Index (CPI), up 4% YoY in August against the previous 3.3% and expectations of 3.8%. Price pressures picked up globally in the month, with hotter-than-anticipated readings also in the United States and the United Kingdom, putting investors on the defensive.
Meanwhile, US government bond yields surged ahead of the Federal Reserve (Fed) monetary policy announcement, further helping the Greenback. The yield on the 10-year Treasury note peaked at 4.36%, flirting with levels last seen in 2007. The 2-year note offered as much as 5.09%, now hovering at around 5.08%.
Concerns mount ahead of the Fed’s announcement even though the central bank is widely anticipated to remain on hold. The inflation uptick in the last month was not enough to spur concerns about a potential shift in monetary policy, yet another bad figure in September could probably result in a hike in November. At the time being, the odds for a rate hike then stand at below 30%, with market players also betting it will be the last of the current tightening cycle.
Chair Jerome Powell’s words will be scrutinized for clues of upcoming decisions and even a hint on when the central bank plans to cut rates. This Wednesday, the Fed will publish fresh economic projections meant to move the market much more than the decision itself.
XAU/USD price short-term technical outlook
The daily chart for XAU/USD shows that it spent the day hovering around the 50% Fibonacci retracement of the $1,982.15/$1,884.77 slump at $1,933.30. The intraday peak was set at $1,937.39, a fresh two-week high, now trading in the red. The pair is technically neutral, as it keeps developing below a bearish 100 Simple Moving Average (SMA), which currently converges with the immediate Fibonacci resistance at $1944.85. At the same time, the 20 and 200 SMAs head north below the current level at around the 38.2% retracement of the mentioned slide at $1,921.80. Finally, technical indicators aim marginally lower around their midlines, lacking apparent directional strength.
In the near term, and according to the 4-hour chart, XAU/USD develops above all its moving averages, with the 20 SMA heading firmly north among the longer ones. On the other hand, technical indicators retreated sharply from near overbought readings but held within positive levels. The risk of a bearish extension could increase on a break below the aforementioned $1,921.80 level.
Support levels: 1,921.80 1,907.30 1,893.90
Resistance levels: 1,933.30 1,944.85 1,954.90
